Bahrain’s deficit for this year and next year could rise by up to two-thirds to BD5 billion ($13.2 billion), as the oil-rich kingdom continues to feel the strain of falling oil prices, it was reported.
The deficit for 2015 and 2016 was originally estimated at around BD3 billion, but this was based on a budget based on an oil price of $60 a barrel.
With oil prices falling below $30, Shoura Council Financial and Economic Affairs Committee Chairman Khalid Al Maskati said the deficit could widen by as much as 66%, Reuters reported.
The concerns appeared genuine as Brent oil traded near $28 a barrel as it extended declines after international sanctions on Iran were lifted, paving the way for increased exports from the OPEC producer amid a global glut, Bloomberg said.
Futures lost as much as 4.4% in London, slipping to the lowest since November 2003. “There is ongoing negative pressure on oil prices from oversupply,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “Iran is not new, but we’ve arrived now at the point where sanctions have been removed and it’s going to be a key focus for the markets over coming weeks. The question is how much supply can come online in the short-term.”
Brent capped a third annual loss in 2015 as the Organization of Petroleum Exporting Countries effectively abandoned output limits amid a global surplus. Iran, which was OPEC’s second-biggest producer before sanctions were intensified in 2012, is trying to regain its lost market share and doesn’t intend to pressure prices with an export increase, officials from its oil ministry and national oil company said this month.
However, on a brighter note, Bahrain’s non-oil sector is forecast to see strong growth this year. The sector rose 3.3% in the third quarter of 2015 but is forecast to grow by 4.2% in the first three quarters of 2016, according to the latest Bahrain Economic Quarterly issued by the Economic Development Board.
Overall growth in the economy reached 2.4% in the third quarter and 3% over the first three quarters as a whole. Growth was driven by the continued resilience of the non-oil sector.
The resilience of the non-oil sector, including the growing pipeline of infrastructure projects, helped to support job growth, with the total number of private sector jobs rising by an annual 7% YoY in Q3. Consistent with the positive momentum in job creation, overall unemployment declined to its lowest level in several years. The official unemployment rate held steady at 3.1% in Q3.
In the banking sector, bank credit continued to grow at a brisk pace with total bank credit increasing by 7% as of the end of Q3.
